Controlling for Heterogeneity in Gravity Models of Trade

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Data Appendix1. Definitions of variablesVolume of Exports, measured in millions of US dollars, from the International Monetary Fund’sDirection of Trade Statistics. Bilateral Exchange Rates are from the IMF’s InternationalFinancial Statistics. Both are downloaded from Datastream’s IMF database, and deflatedusing the $-deflator from the World Tables 97 CD-ROM.Gross Domestic Product is in millions of 1987 US dollars, and Population is in thousands ofinhabitants. Both are from the World Bank’s World Tables 97 CD-ROM.Distance, expressed in kilometers, is the distance between capital cities, obtained from JohnHaveman’s web site at ftp://intrepid.mgmt.purdue.edu/pub/Trade.Data/dist.txt, and fromhttp://www.indo.com/distance/.Contiguity is equal to 1 if two trading partners share common border.Common Language is equal to 1 if two trading partners share a common first language.European Bloc is equal to 1 when both countries are members of the EC for 1991, the EU, for1992-93, or the EEA for 1994-95.North American Bloc is equal to 1 for Canada-US trade for all years, and Canada-Mexico andUS-Mexico trade for 1994-95.MERCOSUR is equal to 1 in 1995 for trade between Argentina, Brazil, Paraguay, and Uruguay.2. Countries included in data set22 Exporters: Argentina, Australia, Canada, China, Finland, France, Hong Kong, Italy, Japan,Kenya, South Korea, Malaysia, The Netherlands, Philippines, Portugal, Singapore, Spain,Sweden, Switzerland, Thailand, United Kingdom, United States116 Importers: Albania, Algeria, Angola, Argentina, Australia, Austria, Bahamas, Bahrain,Bangladesh, Barbados, Belgium, Bolivia, Botswana, Bulgaria, Burkina Faso, Burundi, Brazil,Brunei, Cameroon, Canada, Central African Republic, Chad, Chile, China, Colombia, Congo,Costa Rica, Czech Republic, Denmark, Djibouti, Dominican Republic, Ecuador, Egypt, ElSalvador, Ethiopia, Finland, France, Gabon, Gambia, Germany, Ghana, Greece, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy,Jamaica, Japan, Kenya, S. Korea, Kuwait, Lebanon, Luxembourg, Macao, Madagascar, Malawi,Malaysia, Mauritania, Mexico, Moldova, Mongolia, Morocco, Mozambique, Namibia,Netherlands, New Zealand, Nicaragua, Nigeria, Norway, Oman, Pakistan, Panama, Papua NewGuinea, Paraguay, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russia, Rwanda, SaudiArabia, Senegal, Sierra Leone, Singapore, Solomon Islands, South Africa, Spain, Sri Lanka,Suriname, Swaziland, Sweden, Switzerland, Syria, Tanzania, Thailand, Togo, Tunisia, Turkey,Uganda, United Kingdom, United States, Uruguay, Venezuela, Yemen, Zambia, Zimbabwe24
ReferencesAitken, N. D., 1973, “The Effect of the EEC and EFTA on European Trade: A Temporal Cross-Section Analysis,” American Economic Review, 63, 5, 881-892.Anderson, J. E., 1979, “A Theoretical Foundation for the Gravity Equation,” American EconomicReview, 69, 1, 106-116.Bayoumi, T. and B. Eichengreen, 1997, “Is Regionalism Simply a Diversion? Evidence from theEvolution of the EC and EFTA,” in T. Ito and A. O. Krueger, Eds., Regionalism versusMultilateral Trade Arrangements, University of Chicago Press.Bergstrand, J. H., 1985, “The Gravity Equation in International Trade: Some MicroeconomicFoundations and Empirical Evidence,” Review of Economics and Statistics, 67, 474-481.Bergstrand, J. H., 1989, “The Generalized Gravity Equation, Monopolistic Competition, and theFactor-Proportions Theory of International Trade,” Review of Economics and Statistics, 71,143-153.Bikker, J. A., 1987, “An International Trade Flow Model with Substitution: An Extension of theGravity Model,” Kyklos, 40, 315-337.Boisso, D. and M. Ferrantino, 1997, “Economic Distance, Cultural Distance, and Openness inInternational Trade: Empirical Puzzles,” Journal of Economic Integration, 12, 456-484.Brada, J. C. and J. A. Mendez, 1983, “Regional Economic Integration and the Volume of Intra-Regional Trade: A Comparison of Developed and Developing Country Experience,” Kyklos,36, 589-603.Cheng, I.H. and H.J. Wall, 1999, “Estimating the Effects of Regional Integration on TradeVolumes,” working paper.Deardorff, A. V., 1984, “Testing Trade Theories and Predicting Trade flows,” in R. W. Jones andP. B. Kenen, Eds., Handbook of International Economics, Vol. I, Elsevier.Deardorff, A. V., 1998, “Determinants of Bilateral Trade: Does Gravity Work in a NeoclassicalWorld?” in J. A. Frankel, Ed., The Regionalization of the World Economy, University ofChicago Press.Eichengreen, B. and D. A. Irwin, 1998, “The Role of History in Bilateral Trade Flows,” in J. A.Frankel, Ed., The Regionalization of the World Economy, University of Chicago Press.Evenett, S. J. and W. Keller, 1998, “On Theories Explaining the Success of the GravityEquation,” NBER Working Paper 6529.25
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Page 3 and 4: Controlling for Heterogeneity in Gr
Page 5 and 6: simply on the basis of goodness of
Page 8 and 9: independent variables are assumed t
Page 10: GDPs, their populations, and the di
Page 13 and 14: GDP should be associated with a 6.2
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Page 17 and 18: cross-section results, the year dum
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Page 21 and 22: and BEa results differ enough to re
Page 23 and 24: primary change over the period was
Page 25: 7. ConclusionsThe objective of this
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Page 31 and 32: Table 3: Regression results with in

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